UPS driver Peggy Larson carries packages during her route in Manchester, Wash., in this photo from April 2013. / Larry Steagall, AP

by Jay Hancock, Kaiser Health News

by Jay Hancock, Kaiser Health News

Partly blaming the health law, United Parcel Service is set to remove thousands of spouses from its medical plan because they are eligible for coverage elsewhere.

Many analysts downplay the Affordable Care Act's effect on companies such as UPS, noting that the move is part of a long-term trend of shrinking corporate medical benefits. But the shipping giant repeatedly cites the act to explain the decision, adding fuel to the debate over whether it erodes traditional employer coverage.

Rising medical costs, "combined with the costs associated with the Affordable Care Act, have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost," UPS said in a memo to employees.

The company told white-collar workers two months ago that 15,000 working spouses eligible for coverage at their own employers would be excluded from the UPS plan in 2014. The Fortune 100 firm expects the move, which applies to non-union U.S. workers only, to save about $60 million a year, said company spokesman Andy McGowan.

UPS becomes one of the highest-profile employers yet to bar working spouses from the company plan. Many firms already require employees to pay a surcharge for working-spouse medical coverage, but some are taking the next step by declining to include them at all, consultants say.

"They are simply saying to the spouse outright, 'If you have coverage somewhere else you are not eligible here,'" said Edward Fensholt, a senior vice president at Lockton Cos., a large insurance broker. "We don't see a lot of that out there, but more than we used to."

Gannett, the parent company of USA TODAY, is among the companies that charges extra to cover spouses who have an offer of insurance elsewhere.

This year 4% of large employers surveyed by consultants Towers Watson excluded spouses if they had similar coverage where they work. Another 8% planned such a change for 2014, according to the survey.

"When health care reform came on the scene a few years ago we definitely saw an uptick in companies wanting to explore a working-spouse provision," said Steve Noury, national sales director for HMS Employer Solutions, which monitors dependents' eligibility for corporate benefits. "We have seen (them) over the past two or three years putting those in place."

The health law requires large employers to cover employees and dependent children but not spouses or domestic partners.

Companies have increasingly employed various tactics to get spouses off their plans. The city of Anacortes, Wash., pays employees a bonus if spouses get coverage elsewhere, said human resources director Emily Schuh. This year Xerox went the opposite way, charging employees who enroll working spouses a $1,000 annual penalty, which rises to $1,500 next year, a spokesman said.

Now employers are mimicking the city of Richmond, Ind., which excluded working spouses from its health plan starting in January. Essentially, the problem was that too many people were taking them up on the offer of insurance.

"We have all these (employers) around us who are not covering working spouses," said Richmond human resources director Sue Roberson. "You almost have to do it out of self-defense."

The new plan at UPS, which earned $807 million last year on revenue of $54.1 billion, affects about a quarter of its U.S. workforce.

To explain the switch, UPS gave workers a memo, obtained by KHN, that repeatedly mentions the health act.

While acknowledging that overall health spending continues to rise, the company also blamed cost increases on the Affordable Care Act's research fee (initially $1 per health plan member, then rising to $2) and a temporary fee of $63 per member to stabilize new online marketplaces for consumers buying directly from insurers.

Other factors are the act's ban on annual and lifetime coverage limits and its requirement to cover dependent children up to age 26, UPS said. The law's mandate for individuals to obtain coverage will nudge employees who previously opted out to enroll, also raising costs, the company said.

The health law is "one of the reasons that UPS is implementing the changes," McGowan said.

Advocates of the law argue that its costs are minimal compared with the burden of overall medical-insurance inflation, which the ACA was designed in part to control.

"The notion that those are going to be make-or-break when they are otherwise absorbing 7 to 10% a year [in broader health-cost increases] is kind of ridiculous," said Jonathan Gruber, an MIT economist who advised the Obama administration on health policy. "Nobody expected the ACA to have a major effect on health costs for large firms."

The non-partisan Congressional Budget Office projected in 2009 that the law's effect on premiums for large employers would be negligible.

Consultants point to another health law effect, however, that could also give employers a reason to dump spouses. Excluding wives might help keep companies from paying the "Cadillac tax" on high-value plans that takes effect in 2018, analysts said.

Also, women in their childbearing years "are a cost driver," said Julie Stone, a senior benefits consultant at Towers Watson. "If you have female spouses and you decide not to cover them, you're going to bring costs down."

The Obama administration would not respond directly to UPS' statements but said that employer coverage increased when Massachusetts implemented its own version of the health overhaul.

"The health care law will make health insurance more affordable, strengthen small businesses and make it easier for employers to provide coverage to their workers," said Joanne Peters, spokeswoman for the Department of Health and Human Services.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a non-profit, non-partisan health policy research and communication organization not affiliated with Kaiser Permanente.